Archive

The Spanish Government was left reeling following heavy critizism by the European Union when they published an automatic house-for-residency programme last November. The reason? The very low property price threshold set by the impending law of €160,000.

Now, that value has been set at €500,000 and it appears that this time it is going to happen, according to El Economista.

The draft proposal establishes that the family will also be eligible and the residency will be indefinite for as long as the investment is maintained.

An additional possibility contemplated by the law establishes that a minimum investment of €1,000,000 and 2 workers will give the right to automatic residency, or €500,000 if the investment is kept yearly. There is also the possibility to combine different types of investments to attain the half million mark.

According to the sources, the residency programme will not be retrospective, “as demanded by the Russians”.

Finally, the draft leaves out the right to Spanish State medical cover and education, social beneftis and, rather strangely, the freedom to travel around the Schengen countries (which would breach EU laws on the matter).

Following the implementation of a UE directive on Energy Performance of Building, we should soon start seeing ads like the one above as from the 1st of June 2013 because, according to this new law, any owner wishing to sell or rent out his home will need to supply the tenant or buyer with an energy efficiency certificate for the individual home in question.

The Royal Decree implementing the energy efficiency gives the property concerned a general energy efficiency rating and it includes an objective evaluation of the energy characteristics of the building and, for those homes built, documented suggestions for improving energy consumptions. So if the property qualified poorly on energetic efficiency, the certificate will not obligate the owner to carry out improvement works but will merely suggest what could be done to achieve the efficiency. Generally items such as a boilers, windows, lighting, insulation or even kitchen appliances will be considered in this technical report.

The certificate sets out the basic processes to obtain this certification but it does not mention who will be qualified to do, referring their designation to a separate law. In principle, building engineers and surveyors should be able to sign these.

One should not underestimate the impact of the certification because savings on energy consumption between an A-listed property and one in the lowest efficient bracket can be of up to 70%, which can mean easily many hundreds of Euros per year in extra running cost and thus, be critical when choosing one property over another one.

With respect to the cost of getting a certificate, the Government had predicted that between 90 and 250 Euros was reasonable but recently, the Chairman of the Spanish Association for Quality of Building (Asece) estimated that a price of between 250 and 400 euros was “more realistic”.

Finally, the certificate will be valid for 10 years or until there is a variation in aspects of the building that can modify the original certificate.

A recent ruling by the European Court of Justice (ECJ) has given Spanish Courts dealing with loan foreclosures the right to interpret contracts and their clauses, but has not declare eviction laws completely illegal, as has been widely publicized. The Q & A below summarize the ruling and its effects on borrowers:

Why did the ECJ get involved in this matter? Spanish foreclosure procedural laws are deemed, among legal professionals, as a one-way street. This means that if your bank forecloses you either pay up the whole sum owed or you instigate criminal proceedings to prove that the loan was fraudulent. There are no other possible defenses to stop ultimate eviction under these declaratory proceedings

Is my mortgage loan illegal by virtue of this ruling? No but now Spanish Court have the powers to delay or freeze the eviction of home buyers, who have fallen behind on their mortgage payments, whilst they assess the fairness of certain terms and conditions within the loan contract that, according to the ruling, create “significant imbalance” to the detriment of the consumer.

Which terms were referred to in the ruling? The ECJ criticized the contract submitted to them on 2 grounds: it allowed the bank to take away a home after just one failure to pay an instalment, and provided for a default interest rate of 18.75 per cent. According to the ECJ, Spanish Courts dealing with foreclosures are now able to determine the validity of these clauses.

So how does this affect my existing mortgage loan? The ECJ has opened the door for Spanish Courts to annul mortgage loan clauses that are objectively unfair, such as those quoted above. However, it does not give the borrower the right to stop paying the loan, avoid the debt altogether or stay in the property for good without keeping up the repayments. As journalist Mike Shedlock wrote in respect to Mr. Aziz, the claimant whose loan was scrutinized by the ECJ, “I suspect he can afford to pay 0% and nothing on principal”…which gives us an idea of the where the real problem lies!